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Author: WendyBG Big gold star, 5000 posts Top Favorite Fools Top Recommended Fools Feste Award Winner! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35345  
Subject: Re: Return of the FAQs Part 2 Date: 12/31/2005 7:02 PM
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Loki, excellent job! Many thanks!

One question, to improve my understanding.

You say, about TIPS, "Inflation expectations change daily, so the differential in fixed yield for TIPS and Treasuries varies—from January '03 through July '05, inflation expectations for 10-year Treasuries and TIPS ranged from a high of 2.71% to a low of 1.61%....

If you are convinced you have a better crystal ball than the traders and that the inflation component they are factoring in is too low then TIPS would be a good choice."

Would it be correct to say, "If inflation, over the maturity of the TIPS, is higher than the differential, then the TIPS will yield more than the equivalent Treasury." ?

Thanks,
Wendy
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